PANAMA
TRADE SUMMARY
In 2000, the U.S. trade surplus with Panama was
$1.3 billion, a decrease of $75 million from the
U.S. trade surplus of $1.4 billion in 1999. U.S.
merchandise exports to Panama were $1.6 billion,
a decrease of $133 million (7.6 percent) from the
level of U.S. exports to Panama in 1999. Panama
was the United States’ 45th largest export market
in 2000. U.S. imports from Panama were $307
million in 2000, a decrease of $58 million (15.9
percent) from the level of imports in 1999.
The stock of U.S. foreign direct investment (FDI)
in Panama in 1999 amounted to $33.4 billion, an
increase of 28.7 percent from the level of U.S.
FDI in 1998. U.S. FDI in Panama is concentrated
largely in the finance, petroleum and wholesale
sectors.
IMPORT POLICIES
Panama joined the World Trade Organization
(WTO) in October 1997. WTO accession and
implementation laws passed under the previous
Panamanian administration liberalized the
country's trading regime by reducing the average
tariff level to one of the lowest of any Latin
American state, averaging 15% for agricultural
goods and 8.25% overall.
The current Moscoso Administration, which
entered office in September 1999, raised some
agriculture and food tariffs substantially. In
October 1999, the Government of Panama raised
tariffs on an assortment of 44 farm products to the
highest rates possible under Panama's WTO
commitments. Tariff rates for these products now
average over 56 percent. Examples include
poultry at 293 percent, rice at 123 percent,
evaporated milk at 165 percent, and sugar at 152
percent. U.S. exports to Panama most affected by
the hikes are pork (81%) and potatoes (86%).
Panama's WTO schedules provide for high duties
throughout much of their 5-year phase-out period.
Nevertheless, current Panamanian tariffs overall
remain relatively low.
Of greater concern has been the new government's
use of sanitary/phytosanitary (SPS) permits as an
arbitrary import licensing system, in apparent
contradiction of Panama’s WTO commitments.
The situation improved somewhat in late 2000
under the direction of a new Agriculture Minister.
However, SPS procedures are still subject to
arbitrary application.
Panama is not a member of the Central American
Common Market or any other subregional
economic group. It currently has limited bilateral
agreements with Costa Rica, Nicaragua, and El
Salvador. It continues trade negotiations with
Chile, the Dominican Republic, Mexico, and
several Central American countries individually,
as well with the Central American Common
Market.
STANDARDS, TESTING, LABELING, AND
CERTIFICATION
Panama's standards and certification regime
generally conforms to WTO standards. However,
restrictions have been applied from time to time in
response to sectoral unease with Panama's trade
liberalization. One area of special concern for
U.S. exporters has been the long waiting period
for sanitary and phytosanitary import permits.
Throughout the first year of the Moscoso
administration, the Ministry of Agriculture
(MIDA) often took 30 days or more to issue the
permits. Products hit especially hard by this
practice have been beef, pork, and potatoes. The
Government of Panama's practice of arbitrarily
delaying the issuance of SPS permits, or simply
not responding to requests, appears to be at odds
with WTO commitments. There has been some
positive movement with the appointment of a new
minister of agriculture in September 2000, but
some arbitrariness remains in the system.
Panama requires that Panamanian health and
agriculture officials certify U.S. processing plants
as a condition for the import of poultry, pork, and
beef products. U.S. exporters have assisted
Panamanian officials in making inspection visits
to U.S. plants. There have been no instances of a
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PANAMA
U.S. plant failing to be certified, but inspections
have been delayed many times for various reasons,
including lack of personnel and budgetary
constraints in the responsible Panamanian
ministries. Discussions to address this matter
continue. The U.S. considers it a high priority to
obtain Panama's recognition of U.S. government
certification of packing plants, in order to
eliminate the current plant-by-plant approach.
While importers of non-agricultural products must
register them with the Ministry of Commerce and
Industry before distribution or sale in Panama,
procedures for registration are straightforward and
evenly applied. There are no comprehensive
labeling or testing requirements for imports.
GOVERNMENT PROCUREMENT
Panama's government procurement regime is
governed by Law 56 and managed by the Ministry
of Economy and Finance. The law provides for a
transparent bidding process for government
contracts, but allows for exceptions, such as
procurements for national defense. One such
exception was invoked by the Government of
Panama in the privatization of the Port of Balboa
in 1998 to Hutchinson-Whampoa, a Hong Kongbased company. Some American firms thought the
bidding process that preceded this decision was
unorthodox and mishandled. In contrast, bids for
the state telecommunications company and the
power generation and distribution facilities were
generally considered to have been well-organized
and transparent.
As part of its accession to the WTO, Panama
agreed to pursue accession to the plurilateral
Government Procurement Agreement. Progress
towards accession has slowed considerably in the
past year, and the current government’s intentions
are uncertain. One particular concern remains the
Panama Canal Authority (PCA), which the
Government of Panama has thus far resisted
including in its accession offer. The U.S. has
raised concerns regarding Panama’s stance in the
GPA accession negotiations, as well as lack of
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cooperation in the WTO Working Party on
Transparency in Government Procurement. As a
result of these concerns, the U.S. in December
2000 suspended a waiver of “Buy America Act”
provisions which had previously been applied to
Panama.
EXPORT SUBSIDIES
Panamanian law allows any company to import
raw materials or semi-processed goods at a duty of
three percent for the processing and sale in the
domestic market, or duty free for export
production. The Government of Panama has been
considering eliminating these provisions, under
strong pressure from domestic agriculture
producers alleging abuse by importers. Companies
not already receiving benefits under the Special
Incentives Law of 1986 are allowed a tax
deduction of up to 10 percent of their profits from
export operations through 2002.
Because of its WTO obligations, Panama has
revised its export subsidy policies. The Tax
Credit Certificate (CAT), given to firms producing
non-traditional exports when the exports' national
content and value added meet minimum
established levels, will be gradually phased out.
The policy has allowed exporters to receive CATs
equal to 15 percent of the export’s national value
added until after the year 2002, down from 20
percent prior to 1998. After 2002, the program
will be eliminated. The certificates are
transferable and may be used to pay tax
obligations to the government, or they can be sold
in secondary markets at a discount. The
government has become stricter in defining
national value added, attempting to reduce the
amount claimed by exporters.
A number of industries that produce exclusively
for export, such as shrimp farming and tourism,
are exempted from paying certain types of taxes
and import duties. The Government of Panama
uses this policy to attract foreign investment,
especially in economically depressed regions,
such as the city of Colon. Companies that profit
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from these exemptions are not eligible to receive
CATs for their exports.
Law 25 of 1996 provides for the development of
"export processing zones" (EPZ's) as part of an
effort to broaden the Panamanian manufacturing
sector while promoting investment in former U.S.
military bases transferred to Panama. Companies
operating in these zones may import inputs dutyfree if products assembled in the zones are to be
exported. The government also provides other tax
incentives to EPZ companies.
INTELLECTUAL PROPERTY RIGHTS
PROTECTION
Protection of intellectual property rights (IPR) in
Panama has improved significantly over the past
several years. However, some international
businesses and U.S. government officials remain
concerned about inadequate border measures to
combat transshipment of counterfeited goods
through Panama and about enforcement
deficiencies in the Colon Free Zone (CFZ).
Panama is a member of the World Intellectual
Property Organization (WIPO), the Geneva
Phonograms Convention, the Brussels Satellite
Convention, the Universal Copyright Convention,
the Berne Convention for the Protection of
Literary and Artistic Works, the Paris Convention
for the Protection of Industrial Property, and the
International Convention for the Protection of
Plant Varieties. In addition, Panama was one of
the first countries to ratify the WIPO Copyright
Treaty and the WIPO Performances and
Phonograms Treaty.
Intellectual property policy and practice in
Panama is the responsibility of an Interinstitutional Committee. This committee consists
of representatives of six government agencies and
operates under the leadership of the Vice Minister
of Foreign Trade. It coordinates enforcement
actions and develops strategies to improve
compliance with the law. Over the past several
years, Panamanian authorities have conducted
numerous raids against large video piracy
operations, and several cases are pending in the
courts. The operating permits of some CFZ
companies have been suspended as a result, but
transshipment of pirated goods remains a serious
problem.
The Anti-Monopoly Law (1996) provides for the
establishment of special courts to deal with
commercial cases, including those involving
intellectual property infringement. Two district
courts and one superior tribunal began to operate
in June 1997 and have been adjudicating patent
and trademark disputes. The Panamanian
Government, the U.S. Government and private
interests have sponsored numerous seminars in
1999 and 2000 to train prosecutors, judges, and
other officials in intellectual property laws and
procedures. Some U.S. intellectual property
owners have experienced significant delays when
they have sought infringement remedies in the
Panamanian judicial system.
Panama is in the process of modernizing its
copyright registration and patent and trademark
registration capabilities. The Government is also
drafting amendments to its copyright law that
would fully implement the new WIPO treaties.
An initiative which would consolidate copyright,
patent, and trademark functions into a single
autonomous entity and another initiative to create
a specialized Prosecutor's Office for IPR have
been delayed due to resource constraints and
government transition.
Copyrights
Panama’s copyright legislation dates from 1994,
and is based on a World Intellectual Property
Organization model. The law modernizes
copyright protection in Panama, provides for
payment of royalties, facilitates the prosecution of
copyright violators, protects computer software,
and makes copyright infringement a felony.
Although the lead prosecutor for intellectual
property cases in the Attorney General's Office
has taken a vigorous enforcement stance, the
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PANAMA
Copyright Office remains small and ineffective,
and Panama's judicial system has not provided
speedy and effective remedies for private civil
litigants under the law.
The Copyright Office is in the final steps of
drafting further improvements to the Copyright
Law to implement the new WIPO treaties (the
WIPO Copyright Treaty and the WIPO
Performances and Phonograms Treaty) and also to
establish new offenses, such as for internet-based
copyright violations, to raise the penalties for
infractions, and to enhance border measures. This
proposed draft legislation is moving forward with
technical assistance from SIECA (the Central
American Economic Integration System).
In December 2000, President Moscoso signed an
executive decree ordering the legitimization of
current software inventories and all future use in
government offices, including autonomous
agencies. The decree took effect January 1, 2001,
and gives the Government of Panama a deadline
of 18 months to complete a full audit of all current
software, deleting any pirated software or
software unaccounted for by valid license
agreements. According to the decree, the
Government of Panama has an additional 18
months, or no more than three years total, to
finalize negotiations with software producers for
the full legalization of all government entities.
Panamanian officials have given assurances that
they will establish and implement a rigorous
action plan so that this work can be completed
well before the actual deadlines.
Patents
Panama's Industrial Property Law provides 20
years of patent protection from the date of filing.
Pharmaceutical patents are granted for only 15
years, but can be renewed for an additional ten
years, if the patent owner licenses a national
company (minimum of 30% Panamanian
ownership) to exploit the patent. The Industrial
Property Law provides specific protection for
trade secrets.
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Trademarks
Law 35 provides trademark protection, simplifies
the process of registering trademarks and makes
them renewable for ten-year periods. The law's
most important feature is the granting of ex-officio
authority to government agencies to conduct
investigations and to seize materials suspected of
being counterfeited. Decrees 123 of November
1996 and 79 of August 1997 specify the
procedures to be followed by Customs and CFZ
officials in conducting investigations and
confiscating merchandise. In February 1997, the
Customs Directorate created a special office for
IPR enforcement, followed by a similar office
created by the CFZ in March 1998. The
Trademark Registration Office has undertaken
significant modernization with a searchable
computerized database of registered trademarks
that is open to the public.
INVESTMENT BARRIERS
Panama maintains an open investment regime.
Over the years the country has focused on
bolstering its reputation as an international
trading, banking, and services center. Panama
recently completed an agreement with the
Overseas Private Investment Corporation (OPIC),
a U.S. government finance and insurance agency.
Previously, Panamanian statutes forbidding
foreign government ownership of Panamanian
territory had limited OPIC programs. The new
agreement allows OPIC to operate in full.
Since embracing OPIC, however, the current
Government of Panama has adopted a
disconcerting attitude toward foreign investors. A
number of U.S. firms in Panama that are closely
regulated by, or hold concessions from, the
Government of Panama have encountered a lack
of cooperation and even antagonism from certain
officials. Investment disputes involving U.S.
firms have arisen from Government of Panama
actions, including conflicting contracts the
Government of Panama has entered into with
different firms. In such cases, the Government of
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Panama has frequently been unwilling to
indemnify injured parties.
In accordance with the terms of the US-Panama
Bilateral Investment Treaty (BIT), Panama places
no restrictions on the nationality of senior
management. Panama does restrict foreign
nationals to 10 percent of the blue-collar work
force, however, and specialized or technical
foreign workers may number no more than 15
percent of all employees in a business. A revision
of the labor code to ease restrictions on companies
for dismissing employees was passed in the
general assembly in 1995.
government procurement and, at the municipal
level, in obtaining local construction permits and
the like. This issue is clearly a serious concern for
representatives of U.S. firms already located in
Panama. Finally, the new Government of
Panama's ambiguous policies on trade matters
present deep concerns for investors. Sudden
changes in product restrictions, waiting periods,
and tariff regimes with little or no notice to
exporters have raised particular concerns.
In July 1998, the government passed legislation
aimed at protecting new investment in Panama. It
guarantees that investors will have no restrictions
on capital and dividend repatriation, foreign
exchange use and disposal of production within a
limited number of sectors in the economy. The
spirit of the law is that for ten years, investors will
not suffer any deterioration of the conditions
prevailing at the time the investment is made. The
guarantees are related to new laws affecting fiscal,
customs, and labor regimes, that may be enacted
in the future.
TRADE RESTRICTIONS AFFECTING
ELECTRONIC COMMERCE
The U.S. Government is not aware of any existing
tariff or non-tariff measures, burdensome or
discriminatory regulations, or discriminatory
taxation affecting electronic commerce. The
Government of Panama has drafted e-commerce
legislation that would, if passed, allow binding
digital signatures and provide the legal framework
for e-commerce.
OTHER BARRIERS
The judicial system can pose a problem for
investors due to poorly trained personnel, huge
case backlogs and a lack of independence from
political influence. In addition, corruption
persists, not only in the judicial system, but also in
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